Zimbabweans Wary of New ‘Bond Notes’

Zimbabwe’s government has announced plans to print “bond notes” – a type of cash that people can use for daily transactions. However, many Zimbabweans are wary of the plan, seeing it as an attempt to reintroduce the worthless Zimbabwean dollar.

Local businessmen say they would rather deal with ongoing cash shortages than risk a return to the days of hyperinflation.

U.S. dollars have been in short supply in Zimbabwe for months — a major problem in a country that uses only foreign currency, like dollars, Euros and South African rands.

To combat the problem, the Reserve Bank of Zimbabwe this week limited daily bank withdrawals to $1,000. The bank also says in June, it will roll out new bond notes equivalent in value to the U.S. dollar.

Some Zimbabweans say they prefer the status quo.

Street vendor Paul Rusere says the way I see it, these bond notes will be useless outside of Zimbabwe. Plus in two years, he says they will be worthless here too.

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The reserve bank says the notes are backed by a $200 million African Export-Import Bank facility.

But people’s wariness is understandable. Zimbabwe abandoned its own money in 2009 amid unprecedented hyperinflation.

By 2008, a bottle of water cost 95 million Zimbabwean dollars. People had to carry around stacks of bills bound by rubber bands. Prices for goods would change twice a day. And the black market thrived.

Ralf Marwe imports second hand cars from Japan and sells them in Zimbabwe.

He says the moment the bond notes arrive, the government will start mopping up the U.S. dollars and depositing them in banks. Those who have U.S. dollars at home will stop using them. He says bond notes will be the only ones circulating and that will fuel the black market again and hurt my business.

Some worry the bond notes are a back-door attempt to reintroduce a Zimbabwean currency.

The head of the reserve bank, John Mangudya, has ruled that out.

He says U.S. dollars will be spent on a list of priority imported goods. That list includes fuel and some basic food items.

“This policy will ensure that foreign currency resources are efficiently channeled towards those sectors of the economy with capacity to generate the much-needed foreign exchange to fund the economy going forward,” said Mangudya.

However, economists say the government must also review policies that are scaring away foreign investors, especially indigenization, which requires companies to give majority stakes to black Zimbabweans.